The DAO is the latest initiative to draw funding from Paradigm, which has backed companies like Amber Group, Argent and dYdX, among others.
Code4rena, first formed last year amid rising hacks resulting from smart contract vulnerabilities that have caused billions in losses, is working to solve inefficiencies that plague the traditional audit model by crowdsourcing the task and matching people to their unique areas of expertise.
"This is going to create an opportunity for a lot more people to want to compete," Sock, a Code4rena co-developer, said in an interview, noting that traditional audit models will often see a stressed team of several people scrutinize a project for a couple of weeks and then have to shoulder the blowback if anything falls through the cracks. "C4 basically delivers an absolutely unprecedented level of coverage as a result of the model."
The DAO has already seen 3,500 auditors, or "wardens" as they're called on the platform, participate in 217 audits. Code4rena has worked with some of the biggest names in the industry including OpenSea, Blur, zkSync, Aave, Trader Joe, Sushi and Chainlink.
'Do it for fun'
"There are a lot of people that you couldn't hire in an audit firm who show up to compete," Sock explained. "There are people who are crypto retired, who have been doing this stuff for a long time, but they just do it for fun. There are people who used to work as auditors but who have decided that they don't want that lifestyle."
The platform uses a model that pays out rewards that increase or decrease depending on the severity of the bug and the number of people who find it during one of the timed competitions.
One of the platform's most well-known competitors has already earned over $1 million, according to Sock, who added that one recently discovered bug paid out $70,000.
"The competitive angle just changes things," Sock said. "The most creative people can focus on finding the most interesting bugs. If you are the only auditor, the thing that would be the most embarrassing to you is to miss something easy. You can take for granted in a C4 contest that other people are going to find the easy stuff, and you can focus only on the hardest and most interesting stuff."
Paradigm has a "big picture" view of the market and will be able to help Code4rena as it scales operations, Sock said, adding that the new funding will be used to ensure treasury diversity and help the platform grow "bigger and more resilient."
"What's pretty special about Code4rena is that their contests incentivize hundreds of people to look at the code before it goes into production, and rewards them for doing so," Paradigm investment partner Caitlin Pintavorn said in an interview. "It basically shifts the expected value of hacking or trying to exploit a contract a lot earlier. People are actually doing some more productive work with it, versus waiting until it's actually launched."
Pintavorn said that opportunities abound in the sector, despite the current bear market. Besides security, she also pointed to scaling solutions as an area with growth potential.
"In bull markets, it's easy to conflate product-market fit with the general macro environment when everything's going up," she said. "In bear markets, it's a lot harder to, and so for us, it's actually quite a nice time and very clarifying."
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